WASHINGTON — Credit unions and banks work together in their communities, and if they could elevate that spirit of collaboration to the federal level, it could result in capital reforms for both types of financial institutions, said Linda Armyn, senior vice president of corporate strategy for the $5.3 billion Bethpage FCU.

Armyn made the remark while moderating a legislative briefing Thursday on Capitol Hill in support of H.R. 719, the Expanding Consumer Access to Affordable Financial Services Act, which would give credit unions access to supplemental capital. The bill currently has 38 co-sponsors: 28 are Democrats, and 10 are Republicans.

While trade association representatives on the briefing panel said they hope to work together with bank trade associations to advance the bill, the other side of the aisle has traditionally refused to work together with credit unions in Congress.

But Armyn told of how a big bank competitor in her Long Island, N.Y., market referred customers to Bethpage during tax season, because the 216,740-member cooperative offered free income tax filing assistance to the community. Local community banks also referred customers to Bethpage, she said.

“If that isn’t collaboration, I don’t know what is,” she said.

Panelist Mary Martha Fortney, president/CEO of NASCUS, said during her tenure leading the trade association for state regulators, “the dialogue hasn’t changed” between credit unions and banks. But, she said, there comes a time when the two must work together for the benefit of consumers.

NAFCU President/CEO Fred Becker, also on the panel, said as the economy continues to struggle, bank executives need to realize the focus should be on Main Street, not Wall Street.

“We could be more helpful if we worked together,” Becker said. “So why not give credit unions something in exchange for something banks want?”

CUNA President/CEO Bill Cheney recalled the failure late last year of bankers to renew the Transaction Account Guarantee. Banks would rather see their legislation burn than work together with credit unions, he said, and that’s exactly what happened. TAG is dead, but supplemental capital has survived to be considered in a new Congress.

“Community banks and credit unions have so much in common, and so little that distinguishes them,” Cheney said. “At some point, they’ll come to the realization that we have to work together.”

Rep. Peter King (R-N.Y.), who along with Rep. Brad Sherman (D-Calif.) is a primary sponsor of the bill, spoke at the event in the Cannon House Office Building and said he will ask House Financial Services Committee majority leaders to include the legislation in a housing financial reform bill that also contains a number of regulatory relief measures.

That bill, which has not yet been introduced, already would include Basel III capital relief for banks but no capital reform parity for credit unions.

If made law, supplemental capital could help 40% of all credit unions immediately, Cheney said. While credit unions can already raise additional capital through retained earnings, a method that is less expensive, Cheney said it’s also a less flexible strategy. And during tough economic times, it’s difficult to do, he said. Supplemental capital would provide credit unions with a cushion that could help ease that stress, he added.

Becker said because credit unions are conservative by nature and slow to adopt new things, he doubts there would be a “tidal wave” of credit unions that would take in supplemental capital.

Rather, he said, adoption of the authority would build over time.

Supplemental capital would take a different form than bank capital, Armyn said. Two possible forms would be a high interest, uninsured certificate, and credit unions could control the incoming flow of funds with rates, much as they currently do with deposits, she said. Another alternative would be a $50 to $100 share that would remain in the institution until the member or non-member withdrawals it.

The bill would allow regulators to determine if non-members could contribute capital. In May, NCUA Chairman Debbie Matz went on record in a letter to King saying the regulator supported the bill, but did not say if the NCUA would allow non-members to contribute capital if the bill became law.

Cheney said approximately 2,000 credit unions already accept non-member deposits by virtue of their status as low-income credit unions. Fortney added that some states also allow non-member deposits, so the concept isn’t a new one.

William Mellin, president/CEO of the Credit Union Association of New York, was also a panelist.